BNSF Railway Company (BNSF) today announced its planned $2.75 billion capital commitment program for 2007. BNSF anticipates investing over $750 million in track and facilities to expand capacity – for customers in coal, agricultural products, industrial products and intermodal – to meet unprecedented demand for consistent freight rail service.
Matthew K. Rose, BNSF Chairman, President and Chief Executive Officer, pointed out that, “We are able to sustain increases in our capital commitment program to meet both the current demand for freight rail transportation as well as forecasted future volume growth because of continuous improvement in our returns. For 2006, BNSF’s Return on Invested Capital (ROIC) was a record 11.4 percent, a significant improvement from 10.1 percent in 2005 and 7.9 percent in 2004.”
Rose added that, “For 2007, BNSF currently expects to spend more than $1.6 billion to keep our infrastructure strong by refreshing track, signal systems, structures, rebuilding rolling stock, and implementing new technologies -- an increase of about $50 million over 2006. Total 2007 cash capital commitments are expected to be $2.4 billion. In addition, we plan to lease 200 locomotives with a cost of about $350 million.”
Some of the major 2007 capacity expansion programs are:
A subsidiary of Burlington Northern Santa Fe Corporation (NYSE:BNI), BNSF Railway Company operates one of the largest North American rail networks, with about 32,000 route miles in 28 states and two Canadian provinces. BNSF is among the world's top transporters of intermodal traffic, moves more grain than any other American railroad, carries the components of many of the products we depend on daily, and hauls enough low-sulphur coal to generate about ten percent of the electricity produced in the United States. BNSF is an industry leader in Web-enabling a variety of customer transactions at www.bnsf.com.
BNSF’s ROIC, as discussed above, is a non-GAAP measure and should be considered in addition to, but not as a substitute or preferable to, other information prepared in accordance with GAAP. However, the information is included herein as management believes that ROIC provides meaningful information that can be useful in assessing the long-term performance of the Company’s business and in evaluating potential strategic transactions. Below is the calculation of ROIC for the years ended December 31, 2006, 2005, and 2004.
(a) Average capitalization is calculated as the 13-month moving average of the sum of net debt (total debt less cash and cash equivalents), stockholders’ equity, net present value of future operating lease commitments, and the receivables sold under the accounts receivable sales program (A/R sales).
(b) Financing charges represent the estimated interest expense included in operating lease payments and A/R sales fees.
(c) Taxes are calculated as the sum of monthly net operating income, other expense, A/R sales, and an operating lease interest factor (estimated interest expense included in operating lease payments) multiplied by a federal tax rate respective to each month.
(d) Return on invested capital is calculated as the total after-tax income excluding financing charges and 2004 charge divided by average capitalization.
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